When used car dealers realize their business needs an influx of funding, they’re presented with a few different options. Most prominently, those options are typically a loan from a local bank, or funding from an independent floor plan financing provider. If you’re considering either of these selections, it’s crucial to be aware of few key differences between an auto bank floor plan or a line of credit from a floor plan provider.

Collateral
Depending on the type of loan needed for your business, auto bank floor plan funding might be backed with personal assets, such as a home. However, for dealer floor planning, the collateral used is the inventory purchased. For most dealers with floor plan financing, this means it’s not necessary to put down personal assets to receive needed funding.

With a bank floor plan, dealers often have to follow a majority of the same processes used when buying inventory with cash. This can include keeping track of what funds need to be released when, and personally making sure titles are correctly managed. Though these tasks aren’t necessarily difficult to accomplish, they certainly take up a dealer’s valuable time and effort.

Dealers that use a floor plan lender to buy inventory have access to auxiliary services that can alleviate some time and effort from those administrative tasks. Floor planning dealers can purchase inventory with the confidence that the auction and seller will be properly compensated. In addition, title management is handled on the dealer’s behalf, further saving time and effort for dealers.

Financing Stability
Any dealer needs assurance that their funding partner is going to stick around. Consider a bank’s history with auto floor planning loans, and the level of attention they are capable of providing. Most banking institutions aren’t exclusively devoted to the needs of car dealers.

On the other hand, a floor plan provider is solely committed to making sure dealers have the funding they need to do business.

Types of Inventory That Can Be Purchased
Most dealers like to stock their lots with certain vehicle types, but aren’t eligible to fund those units with a bank floor plan because of certain inventory restrictions. Often, those restrictions are based off of a vehicle’s mileage, make, model, or year. Unfortunately, those unit limitations can significantly reduce a dealer’s potential pool of available units and subsequently, their cash flow.

With a floor plan, there are often fewer restrictions on the types of inventory that are able to be financed. In turn, dealers are able to purchase a wider variety of in-demand units to retail to consumers.

No matter what lender you choose for your dealership, whether a bank floor plan or a floor plan lender, it’s essential to select the best funding partner for your needs.

If you have additional questions about how of a floor plan line of credit can help improve your dealership’s cash flow and help with overall operations, we can connect you to your representative. Or, feel free to apply or contact us with any other inquiries.